An elderly woman living alone suffers a stroke, and falls. Later, at a rehabilitation facility, the woman falls again, this time suffering a traumatic brain injury. She is mentally and physically incapacitated. Before all of this happens, while the woman is still mentally competent, she needs to have a patient advocate designation, concerning her health care, in effect under the MCL §§ 700.5506-700.5515, and a durable power of attorney, concerning transactions in her property and her business affairs, in effect under MCL §§ 700.5501-700.5506. This article provides practical guidance to attorneys on drafting durable powers of attorney for Michigan residents.
Powers Of Attorney Are Strictly Construed
Powers of attorney are construed in accordance with the law of agency. Powers of attorney are strictly construed, and cannot be enlarged by construction. Accordingly, a power of attorney which specifies the acts which may be performed may not be extended by construction so as to authorize the performance of other acts not mentioned.
In Jeffrey v. Hursh, Elizabeth Hursh had executed a power of attorney in favor of John M. Hursh, in which she authorized him
for me and in my name, place and stead, to sell and convey all lands that I am now possessed of in the counties of Clare and Isabella, to receive payments for the same at any price or prices that to my said attorney may seem meet and just, and to execute and deliver such deed or deeds of conveyance in my name as may be necessary to convey the title to such land in fee.
John Hursh, as attorney in fact for Elizabeth Hursh conveyed the land in fee to John Jeffrey. Based upon the deed, John Jeffrey’s heirs-at-law brought ejectment to recover possession of land. The defense offered to show by the admissions of John Jeffrey and otherwise that the deed was given as a mere security for money loaned, and was accepted as a mortgage and recorded as such. The Circuit Court excluded such evidence. The Michigan Supreme Court by Justice Cooley, held that this was error. The power or attorney authorized John M. Hursh to sell the land, but not to mortgage it. A power is not to be extended by construction. The principal determines for herself what authority she will confer upon her agent, and there could be no implication from her authorizing a sale of her lands that she intends that her agent may at discretion charge her with the responsibilities and duties of a mortgagor.
In Penfold v. Warner the Michigan Supreme Court explained the rationale for the strict construction of powers of attorney concerning real property:
We are impressed by the importance of certainty in instruments authorizing the conveyance of lands, and by the serious consequences likely to arise if it be determined that a power of attorney may mean one thing or another, as the tints of surrounding circumstances, resting on parol testimony, may vary. When placed upon record, as under our recording laws it may be, there should be no uncertainty in its meaning, and strangers should not be required to look beyond the language used.
A power of attorney may grant general powers. E.g., “My agent shall be empowered to do all I could do concerning my property if I was mentally competent.” But any authority the principal needs the agent to have should be specified in the power of attorney.
Defensive Power Of Attorney
Care must be taken to avoid unintended authority in a power of attorney. Recently a credit card company sued a client on an old debt. The client is elderly and lives in the memory care unit of an assisted living facility. The credit card company served the Summons and Complaint upon the client’s daughter, at the daughter’s residence. The client has never lived at the daughter’s residence. The daughter is the client’s attorney-in-fact under a durable power of attorney. Like all of my general durable powers of attorney, this one provides that it may be exercised only for the principal’s benefit, and it does not authorize the attorney-in-fact to accept service of process for the principal. The District Court granted my motion to quash the return of service. Going forward, my general durable powers of attorney will specifically provide that the attorney-in fact does not have power to accept service of process for the principal.
In most cases a power of attorney should be immediately effective. Banks and other third parties will not rely upon a power of attorney which springs into effect upon the principal’s incapacity.
Death Of Principal
It is well-settled that the death of the principal revokes the authority of the agent, unless the agency is coupled with an interest. But the death of a principal who has executed a written power of attorney, durable or otherwise, does not revoke or terminate the agency as to the attorney-in-fact or another person who, without actual knowledge of the principal’s death, acts in good faith under the power. Such action, unless otherwise invalid or unenforceable, binds the principal’s successors in interest.
Disability Of Principal
At common law, an individual principal’s loss of capacity to do an act terminates the agent’s actual authority to do the act. The termination is effective only when the agent has notice that the principal’s loss of capacity is permanent or that the principal has been adjudicated to lack capacity. The termination is also effective as against a third party with whom the agent deals when the third party has notice that the principal’s loss of capacity is permanent or that the principal has been adjudicated to lack capacity. A written instrument may make an agent’s actual authority effective upon a principal’s loss of capacity, or confer it irrevocably regardless of such loss. Michigan’s Estates and Protected Individuals Code, MCL § 700.5502, provides:
An act done by an attorney in fact under a durable power of attorney during a period of disability or incapacity of the principal has the same effect and inures to the benefit of and binds the principal and the principal’s successors in interest as if the principal were competent and not disabled. Unless the instrument states a termination time, the power is exercisable notwithstanding the lapse of time since the execution of the instrument.
MCL § 5501(1) provides:
A durable power of attorney is a power of attorney by which a principal designates another as the principal’s attorney-in-fact in a writing that contains the words “This power of attorney is not affected by the principal’s subsequent disability or incapacity, or by the lapse of time”, or “This power of attorney is effective upon the disability or incapacity of the principal”, or similar words showing the principal’s intent that the authority conferred is exercisable notwithstanding the principal’s subsequent disability or incapacity and, unless the power states a termination time, notwithstanding the lapse of time since the execution of the instrument.
MCL § 700.5501(2) provides that a durable power of attorney must be dated and signed voluntarily by the principal, or signed by a notary public on the principal’s behalf under section 33 of the Michigan law on notarial acts, 2003 PA 238, MCL § 55.293. MCL § 700.5501(2) further provides that durable power of attorney must be either—
An attorney-in-fact designated and acting under a durable power of attorney has the authority, rights, responsibilities, and limitations as provided by law with respect to a durable power of attorney, including, but not limited to, all of the following:
(a) Except as provided in the durable power of attorney, the attorney-in-fact shall act in accordance with the standards of care applicable to fiduciaries exercising powers under a durable power of attorney.
(c) Upon request of the principal, the attorney-in-fact shall keep the principal informed of the attorney-in-fact’s actions. The attorney-in-fact shall provide an accounting to the principal upon request of the principal, to a conservator or guardian appointed on behalf of the principal upon request of the guardian or conservator, or pursuant to judicial order.
(e) Unless provided in the durable power of attorney or by judicial order, the attorney-in-fact, while acting as attorney-in-fact, shall not create an account or other asset in joint tenancy between the principal and the attorney-in-fact.
(g) The attorney-in-fact may be liable for any damage or loss to the principal, and may be subject to any other available remedy, for breach of fiduciary duty owed to the principal. In the durable power of attorney, the principal may exonerate the attorney-in-fact of any liability to the principal for breach of fiduciary duty except for actions committed by the attorney-in-fact in bad faith or with reckless indifference. An exoneration clause is not enforceable if inserted as the result of an abuse by the attorney-in-fact of a fiduciary or confidential relationship to the principal.
(h) The attorney-in-fact may receive reasonable compensation for the attorney-in-fact’s services if provided for in the durable power of attorney.
Before relying upon the durable power of attorney, a third party may want an affidavit from the attorney-in-fact or another responsible person that a durable power of attorney remains in effect, and that the attorney-in-fact is authorized to act under it.
In a durable power of attorney, a principal may nominate the conservator, guardian of his or her estate, or guardian of his or her person for consideration by the court if a protective proceeding for the principal’s person or estate is commenced after execution of the power of attorney. The court shall make its appointment in accordance with the principal’s most recent nomination in a durable power of attorney, except for good cause or disqualification.
If the principal wishes to grant the power to make gifts of the principal’s property, the durable power of attorney should specify this power, and clearly identify the person(s) to whom the attorney-in-fact may make gifts. As gifting power is contrary to the fiduciary character of a power of attorney, my durable powers of attorney do not include gifting power, unless the principal requests it, and they never request it. If the attorney-in-fact is empowered to make gifts of the principal’s property to herself or himself, and the attorney-in-fact is or may be other than the principal’s spouse, then the power should be no broader than needed for the spouse’s health, education, maintenance, or support, lest the power cause inclusion of the principal’s property in the attorney-in-fact’s gross estate for federal estate tax purposes, under Internal Revenue Code of 1986, as amended § 2041(a)(2).
A power of attorney should be “in 10-point type,” and have a margin of “at least 2-1/2 inches at the top of the first page.”
Internal Revenue Service Recognition
A Form 2848, Power of Attorney and Declaration of Representative, authorizes a qualified representative to act on behalf of a taxpayer with respect to internal revenue laws. Incapacity of the taxpayer invalidates a Form 2848.
A fiduciary is treated by the IRS as if he actually is the taxpayer. A fiduciary has both the right and the responsibility to undertake all actions the taxpayer is required to perform. For example, the fiduciary must file tax returns and pay any tax due on behalf of the taxpayer.
A fiduciary is any person in a position of confidence acting on behalf of another. Examples of fiduciaries include administrators, conservators, designees, executors, guardians, receivers, trustees of a trust, personal representatives, and persons in possession of the property of a decedent’s estate. This is a reason for an individual to designate as trustee of his trust the same individuals, in the same order of succession, as he appoints an attorney-in-fact.
A fiduciary notifies the IRS of the existence of the fiduciary relationship by filing Form 56, Notice of Fiduciary Relationship.
The IRS will recognize a Form 2848 signed by the taxpayer’s attorney-in-fact notwithstanding the taxpayer’s incapacity, provided—
- The Form 2848 is completed to include the information required by Treasury Regulation § 601.503(a)(1)-(5);
- The attorney-in-fact attaches to the Form 2848 the taxpayer’s original (non-IRS) durable power of attorney clearly authorizing the attorney-in-fact to represent the taxpayer in any and all Federal tax matters; and
- The attorney-in-fact also attaches to the Form 2848 a statement, signed under penalties of perjury, that the taxpayer’s durable power of attorney remains valid under the laws of the governing jurisdiction.
Acknowledgement By Agent
“Before exercising authority under a durable power of attorney, an attorney-in-fact shall execute an acknowledgment” in the form of MCL § 700.5501(4).
A well-drafted durable power of attorney, crafted to meet the client’s anticipated needs, is an important part of any estate plan.
 VanderWall v. Midkiff, 166 Mich. App. 668, 677, 421 N.W.2d 263 (1988).
 Jeffrey v. Hursh, 49 Mich. 31, 32, 12 N.W. 898 (1882); Penfold v. Warner, 96 Mich. 179, 182, 55 N.W. 680 (1893); Kuite v. Lage, 152 Mich. 638, 640, 116 N.W. 467 (1908); Long v. City of Monroe, 265 Mich. 425, 427, 251 N.W. 582 (1933); Crane v. Kangas, 53 Mich. App. 653, 655, 220 N.W.2d 172 (1974); Cooper v. Edgewater Bank, 2011 WL 2848782, *2 (Mich. App. 2011).
 Crane v. Kanagas, 53 Mich. App. at 655; Cooper v. Edgewater Bank, 2011 WL 2848782, *2.
 49 Mich. 31, 12 N.W. 898 (1882).
 49 Mich. at 32.
 96 Mich. at 180, 55 N.W. at 680.
 Citibank, N.A. v. Wright, No. US 21-4014 GC, 41A-2 Dist. Ct., Shelby Township, MI (Jan. 18, 2022).
 The Uniform Power of Attorney Act (“UPOAA”), under consideration for enactment in Michigan, would empower an agent to “waive the issuance and service of process upon the principal, accept service of process” for the principal, and “[confess] judgment” upon the principal. UPOAA § 212(6). How is this in the principal’s best interests?
 In re Estate of Capuzzi, 470 Mich. 399, 402, 684 N.W.2d 677 (2004); Cooper v. Edgewater Bank, 2011 WL 2848782, *3 (Mich. App. 2011).
 MCL § 700.5504(1).
[11 Vine v. State Employees’ Retirement Bd., 956 A.2d 1088, 1096 (Pa. Commw. 2008) (quoting Restatement (Third) of Agency §§ 3.08(1), (2) (2006)).
 MCL § 700.5501(3).
 MCL § 700.5503(2).
 My standard durable power of attorney specifically excludes gifting power. It may be modified to include gifting power.
 See generally MCL § 565.201(f).
 Theodore Halper, TC Memo 1997-58 (1997); IRS, Publication 947, Practice Before the IRS and Power of Attorney (2018), at p. 8.
 Instructions to Form 56, Notice of Fiduciary Relationship (2019), at p. 1. See also IRC § 6903(a); Treas. Reg. § 301.6903-1(a).
 Treas. Reg. § 601.503(d); Instructions to Form 56, at p. 1. The fiduciary must retain satisfactory evidence of his authority to act for another in a fiduciary capacity as long as such evidence may become material in the administration of any internal revenue law. Treas. Reg. § 301.6903-1(b)(1).
 Treas. Reg. § 601.503(b)(3).
 MCL § 700.5501(4).